The debut quarter for the $999 iPhone X will be closely scrutinized by investors looking for a read on Apple’s prospects in 2018. The success or failure of this pricey, ultra-premium new phone will inform Apple’s iPhone strategy going forward.

“The Street has gone into ‘full panic mode’ as supply chain checks out of Asia indicate that March iPhone shipments are trending below expectations,” writes GBH analyst Dan Ives in a research note on Friday.

While Ives believes Apple will notch solid results in the December quarter, driven by stronger-than-expected iPhone shipments and high average selling prices, he says Apple’s guidance will be what really moves the stock.

Wall Street estimates currently forecast that Apple will generate roughly $68 billion in sales in the first three months of 2018 and ship about 62 million iPhone units. But with every news story about weakening demand for the iPhone X, fears are “running rampant on the Street that Apple will guide significantly below expectations for this upcoming quarter,” Ives writes.

So far those worries have pushed Apple’s stock down about 5% from its recent high of $180 earlier this month. And given that Apple’s stock is still trading near its 52-week high, there’s plenty more room to fall if the company confirms people’s fears with a weaker-than-expected quarter.

Apple is in a ‘hand holding period’

source

Yahoo Finance

Ives is actually an Apple bull, giving it a “Highly Attractive” rating and a $205 price target.

But his thesis assumes some near term hiccups, and he describes this as a ‘hand holding period.’

He predicts that Apple will miss Wall Street iPhone targets in the March quarter, with shipments between 57 million and 61 million, versus the 62 million average analyst estimate.

And he’s taken down his 2018 iPhone estimate from 255 million units to 240 million units.

So what makes him so optimistic?

As many as 350 million iPhone customers could potentially upgrade to a new device over the next 12 to 18 months, he says. And he expects 3 forthcoming iPhone models to be released in the next six to nine months, giving users more reasons to upgrade.

“We believe the combination of stronger than expected ASPs, a ‘push out’ of roughly 15-20 million iPhones from FY18 into FY19, repatriation/buyback tailwinds, multiple device launches on the horizon, and a China growth story which is showing signs of renewed growth prospects (albeit with some soft spots) gives us confidence that Apple will be able to navigate near term headwinds and emerge a stronger fundamental story exiting 2018.”